Neil Dougherty: And I could add — just add one additional bit of color on the R&D side. We stayed very disciplined in the period of time in ’21 and ’22, where revenues were growing at a high level of rate. We underspent our R&D target of 16.5% of revenue that continued into ’23. What that enables us to do now in ’24 is maintain R&D investments basically flat. As I said in my earlier comments, that’ll take R&D up above that 16.5% target on a percent of revenue basis, but it’ll allow us to continue our investments to make sure that we’re full participants in the eventual upturn.
David Ridley-Lane: Great. Thank you. And then just a quick follow-up. How are you working on getting the ESI and Keysight sales forces aligned and prioritizing which customers to go after on a joint basis? And am I right in thinking just similar to other software companies, it takes six, nine months to build the pipeline and then another six months to close, so those benefits, we should think of showing up maybe in fiscal ’25?
Satish Dhanasekaran: Yeah, I think ESI was well on track of transforming the business to growth. And our first priority is to continue to support their base plan. And that’s baked into ’24. But in a targeted way, Mark and his team have already started to engage to take those capabilities and apply them to our aerospace and defense customer base in the U.S. as a first order of priority. But as I’ve gotten to know that portfolio, what gives me excitement is their core technologies around hybrid AI, which I think could find a broader leverage into other Keysight applications to accelerate our pursuits. But that’s with time. Our number one priority is to stabilize, integrate, and basically keep their base plan on track. And I think they’re off to a good start.
David Ridley-Lane: All right. Thank you very much.
Satish Dhanasekaran: Thank you.
Operator: Thank you. The next question is from Rob Mason with Baird. You may proceed.
Rob Mason: Yes, thank you. Neil, I wanted to go back to the conversation you pointed out the operating model performing as expected on the downside operating margin on a year-over-year basis. Is there anything that you’d call out sequentially impacting operating margins? It just looks like the sequential deleverage is a little high, if I’m doing my math correctly, higher.
Neil Dougherty: Yeah, it’s a good question. And there are a few things. So, first of all, we had a very favorable mix within the quarter in Q1, not just because ESI was in at $67 million or $68 million of revenue on software, but even within the Keysight classic portion of the business, we were north of 66%, so very favorable in the core as well. We do not expect to be mixed to be as favorable next quarter as it was or frankly — probably for the rest of the year, mix is unlikely to be as favorable as it was in the first quarter. And the other thing would be from an OpEx perspective, we do expect Q2 OpEx to be seasonally higher, that is typical. And the single biggest factor to that is PTO usage. PTO usage is the lowest in the second quarter of our fiscal year, and that’s enough to drive a measurable increase in OpEx as we move from Q1 to Q2.
Satish Dhanasekaran: It might also be worth highlighting our confidence in both the operating cash flow performance and also the free cash flow conversion, we had 98% of net operating profit this quarter. So, we feel good about the cash flow generation capabilities as we navigate this near-term downturn in our markets.
Rob Mason: Yeah, certainly. Just as a second question. There’s — during the quarter, we saw more, I guess, some of your EDA and simulation participants in the market converging. I know Keysight has some strategic partnerships with some of the players involved there. I’m just curious how you think consolidation around those areas affects your opportunity? And maybe you could speak to any of the test layers that would be more impacted or not? And really just kind of getting at how do you define Keysight’s moat in this backdrop where you’re seeing some of the simulation converge?
Satish Dhanasekaran: Yeah. I think when we think about the markets, we’re approaching it, obviously, from tests to emulation to simulation, and we’re connecting the workflow there. In many ways, we collaborate with all of the players that have been on record, and we have a relationship with them so that we can offer a good workflow experience for customers. And this has long been a market where there’s been good interplay between the tools because just like Keysight is an engineering company, we are also a customer of a number of these tools, and it’s hard to standardize on the tool or the other because each of them have different focus areas and different strategies. So, when we piece it together, we don’t view this as necessarily a big impact to our plans. We, in fact, are continuing to progress our system simulation, emulation strategy and SAM expansion. And with ESI in the company, we have more capabilities to drive that strategy moving forward.
Rob Mason: Very good. That’s helpful. Thank you.
Satish Dhanasekaran: Thank you.
Operator: Thank you. There are no further questions in queue. With that, I would like to turn the call back over to Jason for concluding remarks.
Jason Kary: Thanks, Joel, and thanks, everyone, for joining us today. We look forward to talking to you later this quarter and wish you a good day.
Operator: That concludes today’s conference call. Thank you for your participation. You may now disconnect your lines.
